There’s strength in numbers, according to the well-known saying, but what if that axiom was key to empowering entire cities to shift their power supply to renewable energy sources like solar and wind power?

It may sound like a weird trick, but bundling together power demand from thousands of utility customers into one large pool – a practice known as municipal aggregation – is doing just that in cities across the United States, and Illinois is leading the trend.

That’s a success story by itself, but the benefits of aggregation go further by reducing pollution, saving ratepayers millions, boosting demand for renewable energy, and providing dedicated revenue to clean energy projects.

But before we get to the benefits, first a primer on how the weird trick works. Once authorizing legislation becomes law in a state, individual communities can vote to allow local governments to “bundle” their demand into one large pool. Illinois isn’t alone in allowing municipal aggregation – California, Massachusetts, New Jersey, Ohio, and Rhode Island also allow some form of aggregation – but it’s been the most successful state by far.

That community then issues an RFP for independent power suppliers to serve its demand based on specific criteria through a competitive market (i.e. all-renewable or lowest price). By negotiating with suppliers on a bulk basis, the community can secure cost savings or cleaner energy commitments.

Since electricity flows across power lines according to the laws of physics not contractual relationships, buying electrons from specific generation sources across the grid is nearly impossible. Instead, most aggregated renewables are supplied in the form of renewable energy credits (RECs). Each REC represents one megawatt-hour (MWh) of electricity generated from a qualified renewable generation source, driving revenue toward solar or wind projects.

Illinois’s all-renewable cities represent 1.7 million consumers, have boosted annual demand for renewables by over 6 terawatt-hours (TWh), and have reduced emissions equal to taking one million cars off the road or 250,000 homes off the grid.

Aggregation also creates benefits even if the cities don’t choose 100 percent renewables. More than 600 cities across Illinois have opted to aggregate demand for residential or commercial customers and then “shopped” for the best power deal.

Chicago, by far the largest aggregator in the state and country, used the bulk buying power of 900,000 customers to switch from 40 percent coal to five million MWh of electricity generated by natural gas and wind. Initial analysis of the 27-month contract estimates it will cut energy use 28 percent, avoid nearly 560,000 metric tons of greenhouse gas emissions, and save city residents hundreds of thousands in energy bills.

Fortunately for non-aggregated cities in Illinois and the other five states allowing aggregation, the Leading from the Middle report compiles best practices and is a great resource on how to get the greenest power deal possible and expand aggregation’s overall footprint. The report encourages cities to:

Request a local clean energy carve-out – Chicago mandated their power mix include five percent electricity from wind farms in Illinois, but cities can also build their own renewables and ask the competitive supplier to purchase power, capacity, or RECs from that project.

Invest in new local renewables – Cities can create a community clean energy fund for new renewables with a lump sum from the power supplier, a dedicated percentage of consumer rates, or bundled RECs through the power supplier.

Expand transparency of power content labeling – Cities can demand competitive energy suppliers verify their green energy claims by disclosing the type of power mix they supply or where generation is located, either of which can be used by cities to identify the most sustainable power supply.

While aggregation clearly has the potential to boost renewables, it’s far from a clean energy panacea. The largest competitive electricity suppliers (usually the ones with adequate resources to meet aggregated demand) often have coal or natural gas assets in their fleets. Some observers have also voiced concerns over the impact out-of-state RECs have on new renewable development in local markets.

In addition, the very nature of both competitive energy markets and the legislation enabling aggregation can cause logistical headaches down the road. Power prices in a competitive market fluctuate with macro energy trends, meaning consumers can pay more than initially expected. Opt-out language in CCA laws often allows consumers to leave the aggregated pool, creating uncertainty about overall power demand and limiting cities to relatively short-term contracts.

But even considering these caveats, aggregation stands out as a promising policy. And as more and more cities adopt the practice, the economic and environmental benefits make it seem less like one weird trick and more like one powerful tool for decarbonization.

If a community wants wind or solar power via the grid, they should be metered to divide between them only what kWh of power is actually produced when the wind blows and the sun shines, and when there is a spike above what they can use, it should be curtailed so as not to destabilize the rest of the grid. These communities should pay the full 7.5-13.8 cent/kWh lifetime cost of electricity (LCOE) for commercial-scale wind and 24-45 cent/kWh LCOE for commercial-scale solar. In addition, they need to pay their share of the cost of building, operating, and maintaining the necessary transmission and distribution grid to add and delivery this power. If they actually want 24-7-365 power instead of intermittent power, then they need also pay the capacity charge to maintain 100% capacity backup with fully dispatchable thermal generation as well as the energy charge for the kWh of grid electricity they use during nights and cloudy days and low-wind times.
Anyone who is unwilling to pay these charges for their dependence on the grid is welcome to instead pay for and install sufficient on-site electricity storage and renewable power generation to enable them to unplug. To install lead acid or LiON battery storage at home is going to cost $2,000 - $5,000 per kW. The average American home with 2.4 persons living in it uses power at an average rate of 1.25 kW and a peak of 2.0 kW, so that will be an installation cost of $4,000 to $10,000 for the battery system, and that cost will recur every 5 to 8 years depending upon battery usage. The LCOE of using this backup power will be $0.18 to $3.40 per kWh depending upon the backup system load factor (inverse of the intermittent generation capacity factor). The median US LCOE for PV solar is $0.32/kWh, so, whether on local rooftop solar panels or on battery backup, it is far more expensive than the $0.12/kWh US national average for residential electricity.
Just installing enough solar to provide 5.4% of Germany's annual electricity has cost residential taxpayers over $100 billion and they are now paying $0.39/kWh for residential electricity. Misguided communities in America should be free to join them, but don't expect the rest of us to subsidize your uneconomic lifestyle choice.
BTW, maybe US power companies actually know what they are doing.

Trade of Renewable Energy Credits (RECs) makes a lot of sense when the renewables provide only a small portion of the total electric grid demand. They are a great way for individuals and companies to "claim responsibility" for the renewables that are deployed, and feel good about "offsetting" up to 100% of their electricity use.

But as variable renewables reach a penetration that is comparable to the flexible generation (i.e. fossil fuels) which are used to "balance" them, it becomes impracticle to add more renewables (at least at the prevailing electricity price). Hence the RECs create a false sense of scalability.

According to AWEA, Illinois already gets 4.7% of their electricity from wind, so they are not far from the integration problems which will likely occur around 20-40% penetration. With their northern climate, solar energy is no better than wind in this regard, even if a modest amount of energy storage were added.

If these cities in the 100% REC program (which is at roughly GigaWatt scale) had instead gone 100% nuclear, then the program would be easily scalable above 70% or more.

Since Illinois’s total annual retail power sales are about 145 million MWh (3.5% of U.S. total) and the U.S. total annual non-hydro renewable power net generation is about 255 million MWh (6% of U.S. total) that means (in theory) the entire state of Illinois could achieve being operated on 100% of (U.S. REC based) renewable power. This of course assumes that the REC’s are valid/verified to ensure no significant redundancy occurs for available (real) national REC’s that face growing Consumer competition from ‘municipal aggregates’ across the country.

Unfortunately many States have ‘Renewable and Alternative Energy Portfolio Standards’ that make the feasibility of Illinois achieving 100% renewable power in the near future less than possible. In addition, as multiple States increasingly compete for available, but somewhat limited existing renewable power, the competition will very likely make non-hydro renewable power REC costs soar to increasing record highs in the future. In a Free Market, this should also help encourage the future expansion of addition U.S. renewable power capacity.